Love them or hate them but most business decisions involve the use of statistical data including the purchase and sale of investment real estate. For example, one common measure of a good investment property is "affordability". But what exactly constitutes affordable? It is an important consideration and one buyers do not fully understand.
The short answer is that an affordable home is at or below the "average" household income for that location; as it can be purchased by most households and is therefore an attractive purchase. An average priced home are most often biased due to very high priced or very low priced home in the immediate area.However, this really only relates a small amount of the total information required.
Average or mean incomes are notoriously inaccurate due to skewing of results at the high or low ends. Average priced homes are equally biased due to very high priced or very
low priced home. One way to avoid the problem is to use frequency intervals in combination with demographic trends and housing price. Frequency intervals are ways of measuring a large group of items to determine which is the most commonly occurring. For example, let's assume a short sale investor is interested in Purchasing a property in a given city; the average household income verse the average
sales price of a home is roughly 3x the annual household income equals sale price affordability. Household income dictates sale pricing in a given area, the higher the wage
the higher the sale price.Lets say the average household income in a city is $50,000 basically purchasing a home for $150,000 would be the norm. Although some lower income households cannot qualify and the higher income households may not be interested. By learning the households income brackets it can help determine home pricing because buyers relocating to the area are governed by the affordability of their income.
See you at the top because we will help get you there.
this is a great column
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